Deficit splits Dems, Rell

Connecticut’s legislature may not be in session, but that doesn’t stop the political bickering.

As Democrats announced Wednesday afternoon at a press conference that they intend to seek an outside audit of the Department of Social Services, the governor’s office lambasted the proposal as a waste of resources in a time of financial turmoil, when the projected budget deficit for the next year has nearly doubled to $302 million, according to the governor’s office. But Democrats said the state’s budget situation is nowhere near as dire as the governor’s numbers would seem to suggest. Their own estimates show the deficit in the neighborhood of $30 million, said New Haven Rep. Cameron Staples, the chairman of the Finance, Revenue and Bonding Committee, on Wednesday.

Yesterday’s discord comes in the aftermath of Gov. M. Jodi Rell’s budget-related announcement Monday. Rell’s budget office released new figures showing this fiscal year’s projected deficit had jumped to $302 million from $145 million. A spokesman for the Office of Policy and Management said Wednesday that this substantial increase can be primarily attributed to a decline in the rate of income tax receipts, although all other tax sources have also declined since the last estimates were made in August.

The Democrats’ $30 million figure does not take into account the most recent changes in income tax collection accounted for by the governor’s office — their staff has not yet seen those receipt figures, Staples said. But the difference between the $30 million and $145 million estimates stems from different interpretations about how this past year’s Medicaid appropriations should be evaluated.

Approximately $100 million that had been appropriated to Medicaid for last year was not spent, both Democrats and the governor’s office agree. But Rich Harris, a Rell spokesman, said those appropriations cannot be considered in any way as a tool to decrease this year’s projected deficit. That money, like a credit card bill, he said, is still already spent, for all intents and purposes, because the money will ultimately be used for its intended purpose in the Medicaid program.

But New Haven Rep. Pat Dillon and Staples said those funds that had not been spent should be counted toward this year’s deficit. Staples said legislators are uncertain about whether the Medicaid funds are being spent appropriately, and the proposed DSS audit is an attempt to uncover whether there is a problem.

“We are not confident they are managing the Medicaid program properly,” Staples said, referring to the left-over money.

The governor’s office shot back at the Democratic proposal for an audit with a strongly worded statement of its own sent out late Wednesday afternoon.

“The simple fact is that the Democratic majority is desperately hoping to avoid making difficult decisions — particularly before the November elections,” Harris said in a press release. “It would be harder to find a more textbook example of ‘waste’ and ‘inefficiency’ than the comptroller’s plan to spend tens of thousands of dollars to have outside consultants audit DSS.”

Harris said later in the evening in a phone interview that the state already employs 12 internal auditors who were perfectly capable of ensuring that all funds are spent appropriately.

But the result of such differing views on the extent of the budget deficit means that Democrats and Rell cannot agree on how serious a crisis the state is in at this point.

“As Wall Street goes down, our budget deficit is going up,” Rell wrote in Monday’s press release. “Our state economy has been doing better than the national economy — but we are simply not immune from the effects of the national economic downturn.”

Nearly 40 percent of the state’s income taxes come from Fairfield County, many of whose residents commute to work on Wall Street.

Democrats, not surprisingly, agree with the governor on this point that the state will not escape from the stock market crash unscathed.

“There is no question that next year will be brutal for the state’s budget,” Dillon said. “The events in the [national] financial markets do not bode well.”

But she said that as far as this fiscal year’s budget is concerned, she is confident that the state will manage.

“We already made $125 million in cuts this past spring, and we still have the Rainy Day Fund,” Dillon added, referring to $1.4 billion state coffer reserved for financial emergencies.

But the governor has repeatedly said she is not willing to dip into that fund — at least not yet. She reiterated this position in Monday’s announcement.

“[G]iven that things are likely to get worse before they get better, we need to keep the Rainy Day Fund available for the future,” Rell said.

Harris said Wednesday that Rell will continue to look for additional places to make budget cuts and that she will use her executive power to trim state agency spending.

It is that type of unilateral action that worries Dillon.

“I’m not sure what triggered this new round of [proposed] cuts,” she said. “Last time this happened, half the programs cut directly affected New Haven. I’m worried what could happen if she makes too many cuts without consulting us.”

Staples said that there is no talk among Democrats about raising taxes or spending at this time, although, he added, the governor seems to be implying there is by repeatedly issuing statements saying she will not accept higher spending or taxes.

He said Democrats take the current economic situation seriously, and that before the next legislative session opens in January, legislators will keep a watchful eye on incoming revenue data. He hopes, he said, that the planned federal intervention in the financial markets will halt the slide of income tax revenues.

Much as they did last spring over the proposed “three-strikes” law, both Democrats and the governor’s office continue to accuse the other side of playing politics with important issues.

“Perhaps the [audit] consultants will offer a discount if they are also hired to examine the legislative branch for frivolous spending,” Harris’ press release said. “They may wish to examine, for instance, the $200,000 spent this year to chip away marble baseboards in the Legislative Office Building and replace them with granite baseboards.”

Staples, for his part, said the comparison between the Medicaid spending and the money spent on repairs to the Legislative Office Building is “ridiculous.”

“It’s a political stunt to avoid accountability for the Medicaid budget,” he said.

The governor’s new budget deficit projections include a $75 million drop off in income tax revenue, a $27.4 million decrease in oil-company taxes, $20 million less from casinos and sales and insurance taxes $10 million below the earlier estimates.